So, you’ve been flipping single homes and you know the process by heart. Now, you want to take it to the next level—flipping entire apartment buildings. But you don’t know where to start.
Flipping apartments is a whole new ball game—it’s not just about buying low and selling high, it’s about knowing the ins and outs of the market and the property itself and being able to identify areas for improvement that increase the overall value.
Just be aware that flipping apartment buildings usually takes a lot longer than flipping a house—often 1-3 years. Here’s the ultimate beginner guide to flipping flats like a pro.
Finding a Good Deal
Finding a good deal on apartments for sale might seem overwhelming, but it doesn’t have to be.
To avoid a bad investment, you’ve got to understand your market, so find a good local expert to help you get to grips with the area, if you’re investing somewhere other than your hometown.
Have coffee with a commercial real estate agent to pick their brain about the market, tenant demographics and the demand for apartments in the area by asking questions:
Who’s selling apartments and why are they selling them?
Who looks at this area to buy properties?
Are people flipping apartments here? If so, what do their returns look like?
Keep in mind that finding apartment buildings for sale isn’t as easy as finding a single-family home by scrolling online listings, because more apartment deals are sold off the market compared to single-family units.
The reason? Typically, apartment owners don’t want to put up a for-sale sign, because they don’t want to scare the current tenants or they simply don’t want other people to know that they’re selling.
So, to find apartment buildings for sale, ask a specialized real estate agent, or work on building your own seller’s list of multi-family property owners in your target market.
Understanding the Deal: Rent Rolls
When it comes to underwriting a property deal, it’s crucial to have a sharp eye and a shrewd mindset. Before you seal a deal, close your eyes and take a deep breath: ensure you’ve identified potential obstacles, assessed financial risks, and considered market factors, such as rent roll and rates.
Asking about rent rolls helps you understand what’s going on in the apartment, like a list of units (including size, number of bedrooms and number of bathrooms), the names of tenants, and monthly rents.
Evaluating the Deal
Evaluating apartment buildings is different from analyzing deals on single-family units. Single-family properties use comps, while apartment buildings use cap rates. This means that the single-family properties are valued by how much the last similar property was sold in the same area.
By using the cap rate formula—which involves considering the purchase price plus operating costs—investors can better understand how much they will earn relative to their total expenditure.
Get the cap rate using this formula:
Cap Rate = Annual Net Operating Income divided by Price or Value
In short, the net operating income of the apartment property plays a big factor in determining its value – not the amount that a comparable building recently sold for.
The good news is you can increase the value of an apartment building just by increasing income or lowering expenses!
Inspecting the Deal
It’s not enough that you see the property on screen or paper. You have to go out and actually see the apartment building yourself to find out if there are any differences between the comps and the actual property.
The state of the property will be a big factor during your planning. Get a contractor that can help you understand the costs of renovation before you purchase the property, then factor these into your investment cost.
Once you’ve had a contractor’s inspection, and before you make an offer, get an inspector to thoroughly look at the property to verify its market value.
Setting Up Financing
Now that you’ve found a promising building to purchase, it’s time to talk about financing.
Pro tip: Don’t take the first loan offered to you. Instead, look around and find the best loan offer in terms of time and rate. Personally, we prefer a more extended period of time for the loan, since having a low and fixed rate means you’ll pay less throughout the duration of the loan.
It’s already a lot of work to flip apartments, so lessen the headache by settling the terms of payment terms. At the end of the day, you choose the payment terms that work for you and your situation.
Selling the Property
After all the hard work and effort you’ve put into the property, it’s finally time to sell.
Have a specialized real estate agent get the word out and find potential buyers for you. But don’t rely solely on someone else’s sales skills – you should always be building active buyers lists of your own, just like you should be building relationships with potential sellers.
You can market your apartment building flips directly to your buyer’s list, and even do an off-market deal to avoid additional fees and commissions.
The beauty of flipping apartment buildings is that even if you don’t get an offer right away, you can go back to the bank to refinance or hold onto the property a bit to rent it out yourself.
Know the Property to Sell the Property
Flipping apartment buildings can be a bit different from flipping single-family homes, but if it’s your first time, these pro tips can help when you’re thinking about getting into the venture.
It all starts with planning—finding the right deal and evaluating the property and renovation costs are all important factors to ensure your flipping journey is profitable.
This guide can set you on track to flip an apartment successfully. When you’re ready to start your venture, join us as a REIA member for step-by-step support and ensure your long-term success in the industry!
With 80% of office stock built in or before the eighties, many commercial spaces in the market have a huge flipping potential for real estate investors like you.
Large floor, concrete and glass commercial properties are tempting to reinvent from the ground up, as starting fresh may better meet the market’s demands. Even after the industry taking a big hit due to Covid-19, the industry is still trying its best to stay afloat.
Flipping commercial properties shouldn’t involve much hassle and should land you impressive profits… If done right. Before you invest, consider the top factors to ensure a successful commercial property conversion that results in profits—not stuck with a property nobody wants.
Let’s discuss all that below.
Know Commercial Property Types and Uses
Consider the needs of each property type and use. Different commercial property types have different purposes. Before you decide how to flip a commercial property, ask yourself, “Does this property have all the features and factors that’ll make it attractive to buyers?”
For example, office spaces are typically leased for businesses, and retail properties are used as storefronts. Industrial properties are ideal for warehouses or factories, while vacant land is perfect for development projects. Multi-family buildings are often associated with residential housing but can also include spaces for restaurants and local businesses.
If you’re flipping a property for office use, does the property have sufficient parking spaces? If it’s a retail space, can it accommodate heavy foot traffic (if there’s any nearby)? Think of what the end-user will prioritize, because that’s what the buyer will focus on—and so should you.
Moreover, take a look at the trends of each commercial property type. For instance, office spaces became risky investments over the pandemic, where companies implemented hybrid and remote work setups. The trend brought the vacancy rate of office spaces up to 15.4% in Q3 of 2022. In contrast, industrial properties and multi-family buildings only have 4.4% and 6.0% vacancy rate, respectively.
So, take advantage of properties with low vacancy rates or located in areas with limited space for new developments. Those spots offer a good supply and demand situation for your investment, where low-supply, high-demand markets make flipping commercial properties to sell at a high price easy.
Calculate Property Values & Demand for Accurate Pricing
There are several ways to determine a property’s value. You can run with one or be a perfectionist by using each method (we recommend the latter!). Ultimately, you’ll want to choose the methods that make the most sense for your project goals.
By calculating property values, you’ll know how much the property is worth when you sell it. In return, you’ll know how much you should spend to acquire the property and flip it.
#1 Determine the After-Repair Value Using Sales Comps
The After Repair Value (ARV) of a property represents the estimated retail price once it’s renovated. By determining the ARV of a property before purchase and renovation, you’ll know how much you can sell it and see if it’ll generate enough profits.
Now, the easiest way to figure out the ARV is by analyzing comps. To run comps, check similar properties within a quarter to half-mile radius. Identify at least three properties that have sold in the last six months that are comparable in size, type, features, and year built to ensure the most accurate valuation of your potential commercial property.
Next, calculate the average price per square footage of the comps you’ve identified. See how much per square foot they cost, and use that rate to estimate how much your property can charge. Here’s the formula for determining the estimated ARV using comps:
ARV = Average Price per square foot of comps multiplied by the square footage of your property
$1,440,000 = 120 per square foot x 12,000 square feet
In the above example, your commercial property will likely sell for roughly $1,440,000. Is that enough, considering how many renovations you’ll do? Determining the ARV allows you to decide if the property will generate enough returns for you to make a flipping profit.
#2 Capitalization Rate
Capitalization rates (or cap rates) allow you to estimate the return of investment (ROI) of a property. Your buyers will use the cap rate formula to see how much they’ll earn in relation to how much they’ll spend to purchase and operate the commercial space. The higher the cap rate, the more the buyer can earn from it, the more you can potentially charge for the commercial property.
Here’s the cap rate formula to see how much income the property will bring to the owner per year:
Cap Rate = Annual Net Operating Income divided by Price or Value
10% = $150,000 / $1,500,000
There’s no one ideal cap rate because there are a lot of factors that affect a property. However, analysts say a “good” cap rate is around 5% to 10%. Anything below that range is a less risky investment, as it’ll take more time to recover the investment cost—buyers wouldn’t want that, and neither should you.
#3 Estimate Flipping Costs
When planning a renovation, it’s essential to get an estimated repair cost (ERC) so you don’t go over budget and deplete your margins for good flipping profits. After all, no buyer is going to invest in an overpriced property, even if you’ve added all the best features and used the best materials.
To get the ERC, obtain cost projections from professional inspectors and establish a range for the total expense. Don’t just work with one inspector, too. Like how we’d get second opinions from doctors, get multiple opinions from inspectors to have a clear view of the rehabilitation spent.
Here are some tips:
Two estimates: Ensure that contractors take unforeseen repairs into account. They should also give two price scenarios, so there are fewer surprises during the flipping process.
Accountability: Hold all subcontractors accountable for the prices they provide. Don’t allow them to change mid-way, or it defeats the whole purpose of estimating your flipping costs.
Final walkthrough: Conduct a final check with each subcontractor. Double check to ensure that they didn’t leave out any potential cost overruns that’ll dig you into a financial hole.
Unless you’re a contractor yourself, work with licensed contractors to get detailed breakdowns of the cost and a timeline to finish the project. Doing so will ensure that you have a comprehensive budget in place and an accurate timeline that makes sense with the market behaviors to maximize your profits.
Repositioning Commercial Properties for Excellent Flipping Profits
With the expectations that office rental vacancies are going down this 2023, it presents an opportunity for investors to take that leap and flip. Still, it’s crucial to make informed decisions about which properties are worth putting your time into to reap the rewards and avoid the pitfalls of a hasty investment.
There are still a few risks when it comes to investing in commercial real estate (or any investment for that matter), but you can challenge the curve by doing your research and preparing before any purchase. Reposition them if necessary to meet the market’s demands!
Ultimately, choose the right property, anticipate the possible renovation costs, and read the market’s behavior, and you’ll maximize your profits in the end.
Are you interested in flipping commercial real estate and want to know more about it? Join us as a REIA member and attend our upcoming meeting! We also have a newsletter, so you’re never out of the loop.
House flipping is all the rage right now. We all love them, whether we’re expanding our house-flipping portfolio or watching home renovations for fun. There’s nothing quite like seeing a run-down house turn into a beautiful home.
If you’re looking for some inspiration, here are a few of the best house-flipping shows of all time. You might even pick up a few pro tips that you can use in your house-flipping projects down the road.
#1 – Holmes Family Rescue
Does the name Holmes sound a bit familiar to you? You might have heard about Mike Holmes from Holmes on Homes. Holmes Family Rescue is a new show that now includes Mike’s son and daughter.
A Canadian series that debuted in 2021, it follows dissatisfied homeowners whose properties were ruined by low-quality construction.
Luckily, they’re saved by Mike Holmes, a general contractor, along with his 2 kids, who are home renovation experts, Michael Holmes, Jr. and Sherry Holmes. As a family, they show empathy and commit to their mission, “Make it right.”
If you’re not a big fan of the glamorized version of house flipping, then Holmes Family Rescue is the show for you. This show is a great option if you want to learn more about repairs and renovations.
In each episode, Mike, Michael, and Sherry show the substandard work done on the property and explain in detail how they should have been executed correctly. They also talk with the homeowners, asking them to describe their experience with the original contractor and how it affected the way they live now.
Holmes Family Rescue currently has 1 season and is renewed to have another season and will premier in the spring of this year.
Streaming giant, Netflix, is also riding the house-flipping trend with Stay Here.
In this reality show, you follow along with interior designer Genevieve Gorder and real estate broker Peter Lorimer. In each episode, the duo gives serious TLC to a short-term rental home, transforming it into a moneymaker for its owner.
One of the best things about the show is that it features unique vacation rentals, including a houseboat in Seattle, a firehouse in Washington, and a brownstone in Brooklyn.
Apart from remodeling these, Genevieve and Peter also provide viewers with updates on real estate industry trends, as well as advice about finding success in this line of business.
Currently, there’s only 1 season. Although, fingers crossed because there are rumors that season 2 will be released in August of 2024.
If you’re interested in learning what it takes to remodel historic properties, then Home Town is the house-flipping show for you.
It features Ben and Erin Napier, a husband-and-wife team restoring beautiful Southern homes in Mississippi using up-cycled materials to retain the property’s old rustic charm.
The couple is known for infusing their clients’ characters into the homes they remodel.
For example, one episode featured a local restaurant owner looking to settle into a cozy cottage with her grandmother. They ended up with a custom-built rolling kitchen island and a handmade raised garden bed. Both of which were inspired by their personalities.
If Home Town leaves you wanting more, I have some good news for you. They also have a spinoff called Home Town Kickstart.
Watch Home Town on HGTV and Home Town Kickstart on HGTV.
#4 – Designed to Sell
Want awesome tips and tricks that will help make your properties sell?
Sit back and tune in to Designed to Sell, a show where each 30-minute episode features a home that has sat unsold on the market for a long time. Real estate experts and general contractors are then given $2,000 to renovate the property to the best of their abilities.
Because of this limited budget, this show is perfect for flippers who want creative design ideas while getting the most bang for their buck.
It also highlights the country’s most cutthroat real estate markets—Los Angeles, Chicago, Atlanta, and Washington, D.C. Unfortunately, Designed to Sell ended; although, there’s still a backlog of episodes to enjoy.
You might know Tarek El Moussa from Flip or Flop. Unfortunately, Tarek and his past partner have broken up and gone their separate ways. Although Flip or Flop is still a must-watch if you haven’t seen it, we’re moving forward to the next reiteration of the popular program.
Tarek is now married to Heather Rae, a famous real estate agent from the Netflix series Selling Sunset. Together, they’re a power couple who are experts in their own fields. They’re unstoppable with Tarek’s experience in flipping homes and Heather’s eye for high-end real estate.
In the first episode, Tarek and Heather take on their first project together. It’s not an easy ride because there are already some issues with the odd floor plan and uneven floors. But, are their combined knowledge and work experiences enough to conquer this issue?
This show is so new that it just aired this year. Follow along their journey as they expand their business (and family) together.
House flippers need to stay updated with the real estate market to earn profits and with the current design, and trends to create appealing homes. And there’s no better inspiration than the hit shows we’ve listed above. We’re sure there’s at least one series for you—whether your niche is in historical homes, vacation rentals, or luxury properties.
What other house-flipping shows have you enjoyed? Is there anything on your watch list that we didn’t include here? Let us know in the comments—we’d love to hear from you!
And become a member today to join our upcoming meetings and receive our newsletter. You’ll get insider knowledge and learn from experienced flippers in the industry just by being a part of our group.
During the height of the pandemic, the real estate market took a big hit. Large markets like New York felt a significant decline in pending house sales, with a hefty 58% decrease. And in our case, the City of Detroit took an even more severe hit, losing 74% of pending sales.
However, when stimulus packages started rolling in during the latter half of 2020, housing sales came back with a caveat. For example, list prices spiked 27% due to the revived increase in demand. This is bad news for house flippers, as finding good deals is significantly more challenging.
Still, with the pandemic in the rearview mirror, it’s time to look at how the real estate market is shaping up in 2023. And more importantly, is it a good time to build your home-flipping portfolio this year?
Real Estate Trends for the City of Detroit, MI
To try and curb inflation, the federal reserve is looking to increase interest rates across the board.
Just this February, interest rates are up and are expected to keep rising in 2023. That being said, inflation is still going strong. We’re looking at incremental interest rate increases throughout the year.
This results in a more challenging time for house flippers to get financing for their flipping project. To give you an idea of how the real estate market looks in the city, here are some trends we’ve observed:
Days on the Market: On average, properties stayed on the market for 36 days as of November 2022. It’s an improvement from the earlier half of last year’s average of 44 days on the market. Flippers might have an easier time selling their flips because buyers are more willing to buy.
Average Home Price: Compared to June 2021, home prices increased by 38.3%, from $72,500 to $100,205. The increase means house flippers like you might see lower returns on investment because buying a house requires more capital.
Average Sale Price: The average sale price of a Detroit property is identical to its average home price and set a new record by surpassing the $100,000 at $100,250—an increase of 38.3%. This isn’t necessarily bad news, as you might earn a bigger profit when you sell your flip.
Number of Listings: The number of listings increased from 2021 to 2022 by 38.9%, going from $1,983 to $1,428. This figure means that you’re off to a good start, as there are more houses on the market that you can list as options.
Total Sales (Unit): The total sales took a hit in 2022, by -10.1%, from $424 to $383. Your flipping projects might fall through because fewer people are buying, so you need to prepare a good exit strategy , just in case.
List Price: In January of this year, the year-over-year home prices were at an increase of 6.7%, and the average listing home price was $80,000.
Despite the climbing interest rates, the Detroit real estate market continues to climb in price, and the economic outlook in the City of Detroit is shaping up to be moderately positive this 2023.
Of course, we’ll have to wait and see if the interest rate hike will affect the situation, but it seems like 2023 is still a great year for you to potentially expand and earn from your flipping projects—as long as they make sense for your budget and risk appetite.
Flippers should Approach the City of Detroit Market with Cautious Optimism in 2023
Despite society moving on from the issues we faced during the pandemic, real estate prices continue to skyrocket. Sure, there’s pressure for the federal reserve to implement schemes to ease inflation, but various other factors also affect the housing market.
Regardless of what happens, the City of Detroit is still one of the most affordable areas, with its median sale price of $100,205, which is around 4x lower than the US median sale price of $405,900.
You’ll continue to find hidden gems in the famed Detroit real estate market to continue building your portfolio. Just be careful and get into projects that are guaranteed success, which you can do by joining as a REIA member, signing up for our newsletter, and meeting other investors in our upcoming meeting.
Leave a comment below if you have any other thoughts about the forecast for 2023!
Most house flippers don’t have the cash themselves to purchase a property & renovate it outright, so many have to learn how to acquire loans. But if you’re new to house flipping, securing financing may seem daunting.
So the question is—where do you start?
We’re here to help guide you through the process of financing your first flip. Here are the 4 steps to getting a loan for house flipping, so you know how to get one yourself.
1. Determine How Much to Borrow
The figure differs for every individual and investment. Generally, it’ll depend on your current purchasing power, the property’s purchase price, and estimated repair costs (ERC). If you’re new to house flipping, we recommend you work with a trusted and experienced inspector to have accurate numbers.
Once you know the total amount necessary, decide on what type of loan to get.
2. Decide on the Loan Type
Now, different types of loans are commonly used for financing a flip. However, if you want to play it safe, the most common loans are conventional, hard, and private money loans. Here’s the low down on a few different loan types:
Conventional loans are usually the best option if you have good credit and can qualify for a traditional mortgage. The interest rates on conventional loans also tend to be lower than other types of loans, making them more affordable in the long run. The only negative is that the property must be in livable condition, which doesn’t lead to the best deals.
Hard Money Loans
Hard money loans are typically easier to qualify for than conventional mortgages, but they come with higher interest rates. Hard money lenders will also often require that you have some skin in the game by putting down a higher down payment or using your own personal funds for the renovation.
Private Money Loans
Private money loans are given by private individuals or investors instead of banks or other financial institutions. Because of that, they usually have more flexible lending criteria than traditional lenders, making them a good option for borrowers with less-than-perfect credit. However, they take higher interest rates and fees.
3. Shop Around for Lenders
Once you’ve decided which type of loan is best for your financial situation, it’s time to look for lenders. You can find lenders online, through a local chamber of commerce, or by talking to other flippers in your area.
When you’re comparing different lenders, pay attention to the interest rate and fees associated with each loan. You’ll also want to ensure that you’re comfortable with the repayment terms. Some loans may have prepayment penalties which means you’ll owe a fee if you pay off your loan early.
4. Apply for the Loan
Finally, you’ve found a few lenders that you’re interested in working with; it’s time to start the application process. The first step is to fill out a loan application. You’ll need to provide information about your financial history, as well as the details of the property you’re planning to flip.
After you’ve submitted your loan application, the lender will review your information and decide whether to approve your loan. If your loan is approved, you’ll be given a loan estimate that outlines the terms of your loan, including the interest rate, monthly payment, and repayment schedule.
Take your time reviewing all options, sift through the best ones, and accept the one that gives you the best terms. Don’t accept loans haphazardly, or you’ll dig a financial hole before you even start flipping.
Expand Your Purchasing Power with Flipping Loans
You’re now ready to shop around for the best deal on financing your next flip!
As you can see, using a loan is much better than using cash, as it increases your flipping power. Even if you’re a seasoned flipper and have a ton of cash on hand, you still want to increase your deal flow as much as possible to flip more properties. Loans allow you to work on bigger and better projects—even multiple projects at once—without tying your own cash in them.
And if you need more help, don’t hesitate to join as a member of REIA today and attend our upcoming meeting. You can also sign up for our newsletter so you never miss any important tips to become a successful house flipper.
Are you getting ready to flip a house? If so, it’s important to make sure the outside looks as good as the inside.
After all, no one wants it to look like a neglected eyesore or it will scare away any potential buyers. And yet, you have to strike a perfect balance because you don’t want to spend too much time or money on it either.
In the house flipping industry, time is money—the longer you spend remodeling the property, the less profit you earn. Landscaping tends to eat up a ton of time and effort, which means that if you’re investing in long-term lawn care, you’re not flipping fast enough.
On average, flippers spend between 5 and 10% of their budget on landscaping. This may not seem like much but you’d be surprised at how much value this brings. In fact, studies have shown that sprucing up the lawn can increase the home’s value by as much as20%.
That’s a lot of additional profit for each flip. But this isn’t the only reason why you should invest in landscaping. Keep in mind that construction work to renovate other parts of the property will likely mess up the yard, so much so that you might need to redo the entire lawn.
So, let’s take a closer look at how you can effectively spruce up the lawn without going over budget.
How to Spruce Up the Lawn Without Breaking the Bank
No flipper wants to dedicate a huge swath of their budget to landscaping. So, here are a few cost-effective tips for you to improve the lawn without going over budget. The goal is to ensure that the home will attract potential buyers—notably, the target market that you want to reach.
1. Remember Your Audience
Before going crazy with your landscaping to-do list… first, consider what your target buyers will want. For example, if you’re hoping to sell to an older group of people, then perhaps it would be better to not have a lawn at all since they may not want to regularly maintain it. Young professionals, however, would likely opt for a patio or outdoor deck to entertain their friends, rather than a high-maintenance yard.
But if you’re targeting families, then feel free to go level up the landscaping. Chances are, these buyers are prioritizing wide open spaces for their kids and pets to play in. In fact, not having a poorly-maintained lawn may turn them off from seriously considering your property.
Apart from your target buyers, also consider what real estate class the neighborhood, tenant pool, and property belong to. For instance, it won’t make sense to create a beautifully-landscaped lawn for a Class C home since an expensive feature to maintain would be the last thing its tenants want.
2. Make the Grass Greener
A well-manicured lawn and tidy garden can go a long way in boosting your property’s curb appeal. The grass, in particular, has the most visual impact on guests when they first see the house.
Simply adding either fertilizer or grass seeds can go a long way. In fact, do this the minute you start on the flipping project. That way, the grass will already be fuller, healthier, and much greener by the time you’re finished and ready to sell.
As tempting as it is to constantly mow the lawn, it actually puts stress on the grass, especially if you trim off more than 20% at once. So check the cutting height of your lawn mower before turning it on and going to town with it, and ensure that you’re not mowing the grass too often.
This shouldn’t stop you from regularly pulling out the weeds, though. After all, who wants to see an overgrown lawn?
3. Edge the Lawn
If you want the lawn to appear tidier to potential home buyers, use an edger to trim the grass along its perimeter. Doing this creates a crisp and neat border that will make your property look cleaner and more professional, undoubtedly increasing its curb value.
Edging can also highlight landscaping design elements, which is important if you want to draw a buyer’s attention to a particular area of the lawn. It also prevents weeds and turf grass from growing into flower beds, so you no longer have to worry about the aesthetic appeal of your blooms.
4. Don’t Forget the Grass Clippings
For many, grass clippings are sent straight to the garbage can. But for flippers, they’re heaven-sent. Rather than bagging them after mowing the lawn, leave them where they are. Since they’re small and comprised of mostly water, it won’t take them long to break down and fertilize your garden.
However, make sure to clean up the grass clippings from your driveway, the sidewalk, and the other hard surfaces surrounding your lawn.
5. Invest in Lawn Repair Mix
You can easily fix bare patches on the lawn with a lawn repair mix, which typically consists of compost, fertilizer, and grass seedlings.
For better results, remove the dead grass and loosen the soil until at least three inches below the ground. This will give the lawn repair mix enough space to grow. Take care not to overwater this spot to prevent the seeds from scattering.
Sprucing Up the Lawn Won’t Break Your Budget
As always, the goal is to create a lawn that fits the criteria for selling that particular property to a particular target market. You don’t want to spend too much time, effort, and energy on a project that won’t pay off. In all flips, the faster you sell it, the more money you’ll get to keep, so make sure that your remodeled lawn will help you earn the profits you want.
In this article, we proved that landscaping projects aren’t as scary, expensive, or as time-consuming as you think they might be. With just a few easy fixes, you can increase your flipping profits without spending too much time and effort beautifying someone else’s lawn.
For more house-flipping tips, reach out to our team of experts at Logical Property Management. We’ve been serving the Metro Detroit real estate market for more than two decades now, and have everything you need to succeed in the area.
As the popular saying goes—” before you sell anything, you first have to sell yourself.” This statement holds true even In the house-flipping business.
Although flipping mainly deals with selling properties, don’t forget that you also have to deal with flippers, real estate agents, buyers, sellers, and other counterparts in the real estate industry. Because of this, in order to do good business and close flipping sales, you’ll first have to market yourself to establish business relations.
Why Market Yourself?
Apart from wondering how to market yourself using the SWOT analysis, you might be wondering why marketing yourself is even necessary.
To help you answer this question, we’ll ask you another question—as an investor, would you put money in an investment you’re not convinced will grow? You probably answered no. The same goes for lenders, investors, and other business prospects in the real estate industry. Before they shell out any money and do work with you, they first need to convince you’re worth the investment.
And how do you market yourself? By showing what you can bring to the table as a house flipper and why your house-flipping empire will be a success. And that is exactly what your SWOT analysis can do.
What is a SWOT Analysis?
The acronym SWOT stands for strengths, weaknesses, opportunities, and threats. The information in its subsections shows your capabilities and how you work as a house flipper in relation to competitors and your place of business.
Through your SWOT analysis, you can be accurately assessed. In effect, this will help lenders, investors, and other prospective business associates determine whether they want to work with you.
Take a look at this generic SWOT analysis to help you form an idea of how it works:
Chances are this is the first you’re hearing of a SWOT analysis since it’s not often used in real estate businesses like house flipping. However, its lack of commonplace use shouldn’t diminish its value.
Remember that house flipping is a business and the SWOT analysis plays an integral role in any business plan.
To help you grasp how you can leverage a SWOT analysis, here are three things you need to take into account: you or your company, your competition, and external factors. Think of you and your competition as the players, the external factors and the place as the stage, and house flipping as the game.
The more knowledge you have of the game, the better you can play it.
Here’s a chart that shows a SWOT analysis tailored for a house-flipping business plan:
Now that you have a general idea of the SWOT analysis’ role in a house flipping business plan, let’s dive in deeper and go through each subsection in detail. As we break down the 4 subsections, we’ll also tackle how you can leverage these to market yourself and your company.
Your Flipping Strengths
What advantage do you have going into the house-flipping business? Are you starting off with capital or partnering up with someone who already has experience? List down what you and those you work with can leverage and explain why these are valuable.
Here’s a list of questions to get started:
What is your competitive advantage (against other flippers in the area)?
What resources do you have that you can take advantage of?
What part of your flipping business is performing well above average?
For instance, starting out with capital means you don’t have to worry about securing loans or partnering with investors. Having your own finances to pull from lets you move more independently without relying on third parties for funding.
Showing your strengths is the most persuasive point of a SWOT analysis and is the main determiner of whether people want what you can provide. Your strengths also set what’s expected of you as a house flipper, so be careful not to under or over-sell yourself and highlight your strengths honestly.
Your Flipping Weaknesses
Where do you fall short in the house-flipping business? As important as it is to acknowledge your strengths, it’s equally important to acknowledge your weaknesses. If you’re partnering up or working under someone, this is where they’ll form accurate expectations of you.
For instance, if your network consists of young individuals, your flips will likely be within the city near office buildings. In this situation, you’re likely more familiar with flipping small houses for one or two people. A weakness here can be having no properties outside of the city or a lack of experience dealing with larger houses.
These are some questions you can ask yourself:
Where in your flipping business can you improve?
What part of your business is underperforming?
Where are you lacking in resources?
Identifying your weaknesses also lets you identify areas of improvement so you can actively work on becoming a better house flipper. Although weaknesses show your limitations, this can also work in your favor when doing business with others.
As strengths set what they can expect from you, weaknesses show what they can’t. By considering both your strengths and weaknesses you can be more accurately assessed as a house flipper.
Your Flipping Opportunities
These are external factors that work in your favor. Ask yourself: Which market can you tap into? What are people looking for? Which factors can help me close more deals?
When you identify the opportunities available in your area of business, you can gauge which house flip projects can turn a profit and increase the chances of a return on your investment.
On average, Americans start a family in their mid to late 20s.
Given these statistics, there is an opportunity for flipping houses that cater to young, new families, which is where your business is focused on.
If you’re still not sure where your opportunities are, here are some questions to get the ball rolling:
What new markets can your business explore?
What other investment routes can your business potentially consider?
What technology can you use to improve your operations?
How else can you expand your core operations?
By narrowing in on house flips with more profitability, you also increase the confidence of prospective business partners, lenders, and investors to work with you.
Your Flipping Threats
On the other hand, threats are external factors that set limits to your house flips. These external factors are often beyond your control, such as the local weather or building policies.
For example, Michigan experiences winters with temperatures as low as 18°F, so you might run into homes that require more winter-proofing, like replacing HVAC systems or adding more insulation. Threats like these can be laborious, requiring you to assess properties with more care.
These are the questions you’d want to ask yourself:
What local and state regulations threaten your operations?
In what ways are your competitors doing better than you?
What are the market shifts and trends that threaten your business?
Moreover, identifying your threats is essentially stating the factors that you can’t be held accountable for, so you can be assessed fairly.
For instance, if you’re being assessed based on a past project that experienced weather-related delays, that shouldn’t reflect badly on your work ethic as a house flipper. You can also think of your flipping threats as a kind of disclaimer.
Is the SWOT Analysis Worth it?
Challenges and growing pains are inevitable when you’re starting a house-flipping business. But remember that you have the power to make the journey easier with a SWOT analysis.
The insight you’ll get from conducting the analysis then becomes your handy cheat sheet. You can now enter the house flipping game with substantial knowledge, fully knowing how other players are doing on the stage, and exactly how you’ll give your business a leg up.
As always, remember to take your time conducting a SWOT analysis with careful consideration. It plays a major role in your house-flipping business plan, so let’s not get too hasty with it.
Be a House Flipper Worth Working With
A house-flipping business plan that comprehensively addresses all possible queries will leave no room for doubt that you will succeed as a house flipper.
This is your chance to lay down the foundation you need to build your house-flipping empire. Use the SWOT analysis as a marketing tool to show others that you’re prepared, knowledgeable, and set up for success—perfect for doing business in the long run.
This is the final installment of our 3-part house flipping business plan series. If you haven’t checked out the two previous installments, you can find these on the links above.
What other real estate business plans do you want us to discuss? Let us know in the comments below! And should you have more concerns, get in touch with us today.
If you only want to buy a single house to fix and flip as they do on TV shows, do you really need a full-blown business plan? Well, yes! You certainly need one if you want to succeed in the game.
Even if you’re just flipping one house, going in unprepared and without a plan is setting yourself up for trouble. You can go over budget, waste time due to lack of scheduling, and sabotage your house flip.
Instead, go through this Build Your Flipping Empire series to learn how to make a flipping business plan before you jump in with both feet. Doing so, you’ll complete your investment on time and on budget, making a hefty profit that you can roll over into your next project.
In other words, you’ll carve out a path that’ll lead you to long-term success in house flipping.
The executive summary is a synopsis of your entire business plan and serves as the first impression. Remember that potential lenders, financiers, and other business prospects will often only read the executive summary, so ensure that it provides a concise and comprehensive overview of your plan.
You should also include your mission statement here to show your goals and values as a house flipper. For example, if you value family-friendly, move-in-ready house flip projects, your mission statement can say, “Our mission is to grow our house flipping empire one property at a time by turning distressed properties into profitable ones for aspiring young families.”
2. Management Team
A good business plan also has your contacts in place and responsibilities assigned. From the contractors to the real estate agent, list all of them down with detailed roles, qualifications, and experience in house flipping projects.
Here’s an example of what this section will look like:
My team is composed of professionals equipped with the necessary skill sets and work experience to get the job done with quality and efficiency.
General Contractor: John Smith
For over 20 years, Smith and his team of subcontractors (plumbers, electricians, painters, roofers, etc.) have fixed homes all around the City of Detroit. Regarded for his quick and skillful work, Smith has earned the trust of two generations of Detroit residents.
Real Estate Agent: Jane Doe
Doe is an exceptional licensed real estate agent specializing in wholesale and house flipping deals. In her 17 years in the industry, she closes a whopping 4-6 deals per quarter, averaging 20 per year.
Bookkeeper: Jody Miller
Alumni of the University of Michigan, Miller graduated with a bachelor’s degree in accounting. Her financial skills can effectively expense accounted for and within budget, helping our team generate the highest flipping profits.
If you’re new to house flipping and don’t have a lot of connections yet, then take this as an opportunity to build your team. You don’t want to waste time gathering people once a flipping project starts, as having the best people around will contribute to the stability of your operations.
3. Goals & Objectives
Think about what your ultimate goal is for the house-flipping business. Do you just want to flip 1 house a year? Or do you want to build a nationwide flipping empire to quit your day job? Remember to make your goals actionable, measurable, and realistic based on your available resources.
Here’s an example:
Our goal is to be one of the leading house-flipping empires in Michigan. Starting from the City of Detroit, we’ll grow our portfolio by expanding to neighboring cities until we have projects all around the state.
One by one, we will purchase distressed properties, and flip them into quality homes, all the while turning a profit to fund future projects as we continually grow our house-flipping empire. Our ultimate objective is to flip unloved properties into family homes.
Pro tip: Break down long-term goals into short-term ones so they’re easier to achieve and clearly mark the journey towards achieving the overall business objective.
4. Market Analysis
Knowing the real estate market in detail can help you make informed decisions moving forward. The market analysis provides insights to assess whether your business plans are likely to succeed or need some tweaking, all in relation to the competition.
Additionally, your market analysis will show prospective lenders, investors, and business partners your market knowledge and how you plan to use that for your financial plans and gain.
Here’s a list of questions to guide your market analysis:
Is the neighborhood gaining real estate popularity?
Is the property type you’re flipping in demand?
Is there a large pool of potential buyers?
What are the local crime rates?
How far is my prospective property from the necessary facilities?
What are my weaknesses against the competition?
What are my strengths against the competition?
Let’s use some data from 2021 to have a quick look at how a market analysis can go:
Recent statistics show a rise in flipping activity in Michigan. For example, in two Wayne County zip codes alone, 25% of all real estate sales were house flips, and Redford saw a 99.9% increase in house flipping in the first quarter of 2021—doubling the rates of the previous quarter.
Given the statistics, you can see these parts of Michigan are highly saturated and competitive. We can infer that pricing gets more competitive, with margins between buying distressed property and selling a flipped house getting smaller.
Although some cities in Michigan are highly competitive with advanced house flippers, there is still an abundance of opportunities state-wide for novices. Strategically, we can start in less competitive areas until we progress to more advanced markets.
The market is always shifting, however, so ensure that you constantly update your plan. After all, a great business plan is one that remains relevant and can guide you even in the later stages of your empire.
A market analysis is an opportunity for you to learn more about the house-flipping business. Another focal point of this section is getting to know the competition—how competitive is the market? What makes them competitive? Are there certain competitors to look out for?
“SWOT” stands for Strengths, Weaknesses, Opportunities, and Threats. Your SWOT analysis lets you gauge how you compare to the competition, identifying your relative performance in the market.
Let’s break down each letter and see what you should put within each section:
Referring to the infographic above, the guide questions show you what’s being asked for under each section. After the guide questions, the bullet points show sample information of what you input.
The SWOT analysis examines 3 factors: you, your competition, and the external factors of the area you plan to do business in. By having comprehensive knowledge of these factors, you can work smarter, and in turn, maximize your profits.
We’ve only scratched the surface of what goes in this section of a house-flipping business plan. If you want to take a deeper dive into the SWOT analysis, we’ll go into this in part 3 of the series!
6. Lead Generation & Marketing Strategies
Next, determine the best ways you can generate leads and market your business. We understand that this can be a challenge in the house flipping business, but try out these methods to get started:
Leverage Networking: Helping other real estate investors is a great way to keep your deals flowing. Pooling together resources can help you establish mutually beneficial relationships with other flippers and other real estate investors. Even if you have to split the profits, networking gives you consistent work while building your empire.
Drive for Dollars: There are many leads out there that can offer you profitable deals, and it’s just a matter of driving around and finding signs like “for rent” or “for sale.” These signs often have contact details of the assigned real estate agent or seller listed, where you can make direct calls to ask about possible deals. It’s also a great opportunity for you to build your network of agents.
Real Estate Agents: If you’re looking for a helping hand that has substantial knowledge of the real estate market, a real estate agent is your best bet. They can help you find leads, teach you the tricks of the trade, and get word of your house flips out in the market. Since these relationships are mutually beneficial, they can even become a long-term business partner.
These are just some lead generation and marketing strategies we found will be the most helpful for your house flipping projects, but you can use a mix of different strategies for more results. Remember to list down and define which ones you plan on using in your house-flipping business plan.
7. Finance Plans & Projections
You can’t do any business if your finances aren’t in order. So, will you be financing your house flip projects out of your own pocket or will you seek the aid of a lender? Because if you need funding, then it’s paramount that you earn their trust.
So, here’s what you need to include in this section:
Documents: Prepare all the necessary documents that show you’re financially able and responsible. You can include income statements, cash flow statements, and balance sheets.
Earnings: Tackle how much you expect to earn and how you will allocate your earnings. If you expect to earn $50,000 per deal? $75,000? Will you allocate 80% for future project funds? Will you keep 20% or less for yourself?
Budgeting: Although each project will come with its own set of repairs and touch-ups, it’s always good to have a standard budget as a guideline. You can list them out as percentages, so you show how you’ll stick to a budget and avoid over-improving properties to protect your profits.
Projections: Go over your business projections. Where do you see yourself months from now? What about 3 years after? Your projection should cover the next 2-5 years to give a clear picture.
Remember: One of the main reasons for making a business plan is to use it for getting approval on loans. So make it awfully clear how financially viable your flipping business is to earn others’ confidence.
8. Growth Strategy
We understand that it’s hard to think far into the future when you’re still getting your business off the ground. However, setting goals can keep you in line while showing future lenders, investors, and potential business partners that you are dedicated to building your house-flipping empire.
Here are a few examples:
Invest in Single-Family Homes: Single-family homes are a commodity that most types of buyers consider, so the pool of prospective buyers is larger. Opting for these kinds of properties increases your chances of closing a deal while lessening the effort you put out to gather leads and market the property.
Diversify your Real Estate Portfolio: Although house flipping is the main priority in building a house flipping empire, that doesn’t mean you can’t add other real estate ventures to your portfolio like wholesaling real estate, as it also starts with distressed properties.
Plus, if a flip looks like it’s going to flop, an exit strategy and an alternate venture you can consider are property rentals. In a nutshell, it’s all about diversifying the investments in your portfolio to secure growth.
Growing Your Capital Faster: Another way of looking at “growth” is looking for opportunities that can grow your financial capital quicker. By choosing and making the right investments early on, you’re on the fast lane to having more financial freedom, and in turn, the liberty to take on higher risks and higher reward projects.
There are more ways to ensure that your flipping empire grows. You can conduct more research to see what else you can do (and include in your business plan) so your vision is both short- and long-term.
9. Exit Strategy
Considering that your house flip project can flop when you’re just starting out can be discouraging, but having an exit strategy can be a lifeline to saving your investment. Rather than looking at it as a backup plan for failure, see your exit strategy as a “Plan B” for you to turn a profit—whatever happens.
So, identify alternative ways where you can get a return on your investment. Here are some you can consider for your house flipping business plan:
Slash Your Price: Lower your price if you’re pressed for time. If your flip seems like it’s going to flop, lowering your price can effectively heat up the market again. Even if it’s not as high as you expected, you can still walk away with some financial gain.
Tap a Different Market: If your house flip isn’t picking up in the buyers’ market, tapping into a different market can be a viable option. Long-term rental can present itself as another business venture and a form of passive income.
Rent It Out: With a property flipped and ready for residency, an alternative to closing a sale can be renting it out. Apart from being an alternative way of getting a return on your investment, you can add rental properties to your portfolio. Having different avenues of income also helps with gaining the financial stability you need to grow your house flipping empire.
Your exit strategy should be the next most financially sound option that aligns with your circumstances, so evaluate your situation carefully before taking any action.
A Foolproof Plan for Flipping Success
Learning more about the business, strategizing growth plans, and planning exit strategies can provide you with the direction you need to move forward with your goals.
Apart from serving as your guide, your house-flipping business plan will also provide comprehensive information on all areas of your business for new investors, lenders, potential business partners, and other people might do business with.
Business plans aren’t just for you, but also for those who will work with you.
With all your bases covered, you are clear and confident in what you want to achieve and how you plan on achieving it. You’ll be well on your way towards creating a house-flipping business that won’t turn into an expensive, capital-depleting flop.
This is the second installment of our series on house-flipping businesses, so stay tuned for our last installment! And if you have any questions or specific topics you want to learn, let us know by dropping a comment below or getting directly in touch with our team.